UNSUSPECTING manufacturers keen to promote the country of origin of their goods risk a marketing disaster, and major fines, unless they fully grasp the laws controlling such claims.
Stephen Voss, partner at commercial law firm Thomson Playford, said despite country of origin guidelines being added to the Trade Practices Act in 1998, there was still a lot of confusion among manufacturers about their use.
“Although these laws have been around for some time, many producers are still unclear on what they can and can’t claim when promoting their product,” Voss said.
“While a country of origin claim can be a powerful marketing tool, if used incorrectly, it could turn rapidly into a marketing disaster.
The country of origin provisions under the Act set out what is required to claim a product is “made in (country)”, such as “Made in Germany”, or to state an item is “produce or product of (country)”, such as “Product of Australia”, or similar wording.
Voss said the two terms were not always interchangeable and each involved different criteria. The rules also applied to any country of origin claim, not just for goods made in Australia.
Failure to comply with the guidelines could result in a breach of the Trade Practices Act, under which a company can be fined up to $1.1m for each offence. An individual can also be personally fined up to $220,000 for each deliberate breach of the Act.
“It is an issue that appears to have gone quiet recently in terms of major legal prosecutions, but no company would want to find itself as the next headline act,” Voss said.
To claim an item is “produce or product of…” is a premium claim about a good’s origin.
As a result, to be able to establish this claim, the manufacturer must be able to prove that each of the good’s significant ingredients or components have been sourced from that country.
Secondly, it is also necessary to be able to prove that virtually all of the manufacturing processes have been undertaken in that country.
Voss said a “significant ingredient or component” was one that gave the item its essence or character in the eyes of the consumer.
It did not always relate to the percentage or ratio of that ingredient in the final product. For example, a fruit juice drink may contain mostly water and a smaller percentage of juice, but it is the sourcing of the fruit which would be critical to any country of origin claims.
“The conditions placed upon making this claim are more demanding than the ‘made in…’ claim, so manufacturers need to be extra vigilant that they meet the criteria,” Voss said.
To label an item as being “made in…”, the item must be substantially transformed in that country into a product that is new and different to its original components.
“It is not sufficient, for example, to import a bulk cheese, simply repackage it as sliced cheese in Australia and then claim it is ‘made in Australia,” Voss said.
A second criterion is that at least 50% of the cost of making the product must be linked to the manufacturing process in that country.
Voss said the production cost could include expenditure on the materials used to manufacture the item, the overheads and the labour involved, provided they could all be reasonably allocated to that product.
“While it may seem confusing, it is imperative that a manufacturer understands what is required for country of origin labelling if they are to avoid a potentially devastating action against them for false representation,” he said.
For more information contact:
Thomson Playford
E – info@thomsonplayford.com.au
W – www.thomsonplayford.com.au
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